- News on Albertsons merger eagerly anticipated
- Full-year earnings guidance increased after strong Q2
- Ocado could be big beneficiary if merger gets approval
There is lots to look forward to ahead of US grocery group Kroger’s (KR:NYSE) third quarter earnings report which is due to be released on 1 December.
In October Kroger announced a $25 billion mega-merger with another big national grocery chain Albertsons (ACI:NYSE).
The proposed deal pulls together leading brands such as Shaw’s, Safeway, and Fred Meyer and means the combined group will control around 13% of US grocery sales serving an estimated 85 million households.
The grocer promised the deal would result in lower prices for customers and better pay for workers, but there is considerable debate stateside on how it would play-out in practice. Regulatory scrutiny means a decision is not expected until 2024.
To appease regulatory concerns, Albertsons plans to spin-off up to 375 stores into a separate company.
WHAT IT MEANS FOR OCADO
The eventual outcome of the proposed merger is also a big deal for UK retailer Ocado (OCDO). The online grocer-to-e-commerce tech licensor signed an exclusive partnership with Kroger in 2018.
If successful, the proposed mega-merger could open the door for major expansion in the US should Albertons make use of Ocado’s warehousing and automation technology. Kroger is a major shareholder in Ocado with a 5% stake.
WHAT TO EXPECT
The last four quarters have seen Kroger beat earnings estimates by an average of 15% according to data provided by Nasdaq, while Zacks Investment Research shows the average third quarter earnings estimate is $0.8 per share.
Kroger increased full-year guidance after beating second quarter sales and earnings estimates and is guiding for sales growth of between 4%-and-4.5% and earnings per share in the range of $3.95-to-$4.05, representing year-on-year growth of around 9%.
Consensus earnings estimates sit at $4.07 after rising nearly 20% over the last few months, which implies analysts are expecting another beat in the third quarter.
